ASEAN Explores Dropping US Dollar: A Shift Towards CBDC and Blockchain Technology
Published 5 months ago on September 21, 2023
by Rina Kurniawan
The Potential of ASEAN’s CBDC and Blockchain Technology: A Game-Changer for Regional Economies
ASEAN Finance Ministers and Central Bank Governors have discussed the possibility of reducing their reliance on the US Dollar and phasing out payment systems, such as Visa and Mastercard. This move could pave the way for implementing central bank digital currencies (CBDCs) and blockchain-based financial infrastructure in the region.
ASEAN and the US Dollar
The Association of Southeast Asian Nations (ASEAN) is an intergovernmental organization promoting economic, political, and cultural cooperation among its ten member countries.
Historically, the US Dollar has played a significant role in financial transactions in the ASEAN region due to its status as a global reserve currency. However, recent geopolitical tensions and economic uncertainties have led ASEAN countries to reconsider their dependence on the US Dollar.
In addition, Visa and Mastercard have long been the dominant payment systems in the ASEAN region. Nonetheless, growing concerns over transaction fees, data privacy, and centralized control have led ASEAN Finance Ministers and Central Bank Governors to consider alternative payment systems. ASEAN countries aim to promote regional economic integration and resilience by exploring new financial technologies.
Indonesia’s President, Joko Widodo, has urged local governments to use credit cards issued by local banks and gradually stop using foreign payment systems, such as Visa and Mastercard. He argued that Indonesia needs to protect itself from geopolitical disruptions, citing sanctions targeting Russia’s financial sector from the US, EU, and their allies over the conflict in Ukraine.
“The use of local government credit cards, in this digital era, should be achievable. If we can use them, we can be self-reliant,”said Jokowi during the opening of the Domestic Product Business Matching in Jakarta Wednesday (15/3).
The potential of Central Bank Digital Currencies (CBDC)
One solution to reduce reliance on the US Dollar and centralized global payment systems is to optimize CBDC adoption and blockchain technology.
CBDCs are digital representations of a country’s fiat currency, issued and regulated by the central bank. CBDCs offer several advantages over traditional payment systems, including enhanced security, lower transaction costs, and increased financial inclusion. Additionally, CBDCs can help ASEAN countries reduce risks associated with excessive reliance on the US Dollar and strengthen regional currency cooperation.
Bank Indonesia (BI) is currently developing the use of CBDCs. Bank Indonesia Governor, Perry Warjiyo, mentioned that CBDCs are being developed as crypto assets requiring a reference unit of account from sovereign digital currencies.
Perry said CBDCs need to be promoted in ASEAN countries, along with the rapid development of crypto assets. Therefore, central banks are obliged to accelerate the growth of central bank digital currencies, including promoting CBDCs to the public and other ASEAN countries.
“We are obliged to accelerate the development of central bank digital currencies,” said Perry during a High-Level Seminar From ASEAN to The World, titled “Payment System in Digital Era,” quoted by Antara, Wednesday (5/4).
Embracing Blockchain Technology
Blockchain has the potential to revolutionize the financial sector. By adopting blockchain-based systems, ASEAN countries can enhance the efficiency and security of their financial transactions. This technology can also facilitate the development of new financial products and services, driving innovation and economic growth in the region.
“Blockchain and programmable money have opened a new era in the global financial system and cross-border digital payments. With unparalleled speed, security, and transparency, this technology creates a bridge that connects the world economy, eliminating barriers and empowering people to transact more efficiently and inclusively,”said the CEO of D3 Labs, Chung Ying Lai.
“We believe that, through blockchain innovation and programmable money, we will create a more equitable and sustainable financial future for all.”
Challenges and Concerns
Ying added that although CBDCs and blockchain technology offer promising opportunities for ASEAN countries, they must address several challenges and concerns. These include a solid regulatory framework, data privacy protection, and cybersecurity measures.
Furthermore, interoperability and collaboration among ASEAN countries will be crucial for successfully implementing this new technology.
Steps to reduce reliance on the US Dollar and abolish the centralized global payment system by ASEAN Finance Ministers and Central Bank Governors reflect a growing interest in exploring alternative financial strategies.
“By embracing CBDCs and blockchain technology, the region has the potential to enhance its economic resilience and promote innovation. However, it is crucial to address related challenges and encourage regional cooperation to ensure the successful implementation of this new technology,” concluded Ying.
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